U.S. Oil Rig Count Inches Up As Production Jumps

Despite today’s turbulent markets and less-than-appealing oil prices, North American drillers seem to be continuing to slowly but steadily ramp up the number of active rigs in production by the week, and this week the oil rig count rose again—this time by a modest two.

Oilfield service company Baker Hughes has reported a 2-count rise in the number of active oil rigs, and a 2-count decrease in the number of gas rigs. Miscellaneous rigs also dipped one this week.

Last week, Baker Hughes reported that 9 new oil rigs were placed into production, unsettling an already turbulent market courtesy of OPEC in-fighting, the looming supply glut, and the general uneasiness over the then-undecided US Presidential election. Prices this week looked even more grim. Gas rigs also saw a three-site increase in the prior reporting period. But don’t panic, everybody. Despite this important indicator that often moves markets, US production is not catapulting into the stratosphere.

The figures may be a sign that US rigs, although taking a hit in late 2015 and early 2016, are once again on the upswing. In fact, overall gains within the last six months of over 122 oil rigs.

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The increases in rig count, however—from 328 oil rigs on May 6 to 452 this week (a huge 37 percent increase in that timeframe) didn’t seem to jive yet with US oil production, which was 8.8 million barrels per day on May 6, and now stands at 8.69 million barrels per day on November 4—a 1.2 percent decline, according to EIA data.

The production trend however seems to have turned around last week as the following chart from Zero Hedge shows:

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While the rig count may be seen as a sign of renewed vigor in the sector within the United States, an increase in rig count—even by a very large 122 rigs, shouldn’t be construed as changing the fundamentals of the oil market.

In addition, the overall oil rig count is still 122 below this same week in 2015, back when the US was producing 9.18 million barrels per day.

By basin, Eagle Ford gained three rigs this week, followed by Utica, which gained 1 rig.

Last week, prior to the rig count data release, WIT was trading at $43.99, with Brent at $45.50—figures that were about $5 per barrel under prices from the week prior. This week’s prices are even lower, with WTI checking in at $43.43 ten minutes before release, with Brent at $44.60—with only $1.17 separating the two major benchmarks.

Within ten minutes of the Baker Hughes release, WTI and Brent were still holding on the modest news.

In more surprising news, Canada put into production 22 new oil and gas rigs, and is now on par with last year totals.